New $1trl GOP Stimulus Package Announced

K, very good morning to you. I hope you're doing well. It is Tuesday, 28th of July, so getting straight into the briefing for this morning and just starting off with the, the general setup of the charts across different assets. And I guess the one talking point that people are still referring to the most is the precious metals space. Both gold and silver seeing another clear move to the upside in the overnight session, but then being subject to a bout of profit taking, which is one of the first things I wanted to talk about because I don't necessarily think that that should be too alarming for any of the gold bulls out there. But otherwise, elsewhere, the dollar also, which has been obviously trading down at a multi-year low, having in the Dixie, uh, just seen further follow-through from the, the prior session's break we've had of that key 95 level, uh, just bouncing back a little bit. So the Dixie's a little bit firmer in generally the overnight session, and that's trading up 0.2%. So just seeing both major pairs here in the top left in minor negative territory, uh, by around 15 to 20 pips in EURUSD and Cable respectively. In terms of the equity index futures, uh, minor positive. I'd say the S&P's actually pretty much flat. The Nasdaq slightly up, as too is the DAX at this point in time. Then elsewhere in the crude complex, pretty quiet actually there after what had been a little bit of a focal point about a week ago when it was testing some of those upside levels given the strong rally it had been seeing. It's generally been in a period of relative consolidation at the moment, uh, so still trading a $41 handle. And in terms of the US 10-year, it was tracking a little lower in the overnight session, however, has just bumped up a touch as Europe's coming to the market. We're down about 3 ticks there in the bottom right-hand corner. But look, let's jump straight into precious metals and let's start with, with gold. And just first of all, going to look at the near-term price activity. I mean, this is looking just purely on the basis of the last week. I mean, it's quite phenomenal to think that we were trading— even if we just go back to around the 20th, we were trading at $1,800, and obviously we've run up in the overnight session, uh, we printed a high in the futures at 1974.5. And the break, of course, was here when we hit those previous all-time highs. You can see the extension on those wicks, and this then does mark quite an interesting area now of technical support on any pullbacks. And we've actually found a bit of a floor at that price at this moment in time, which is really here. What I'm looking at is 19.25, 25.5, which would mark then initial run-up on the break to fresh all-time highs in the futures. And then this floor generally that as, uh, the price is respected through yesterday afternoon London time. And then also it is today's daily pivot and was the support area late in the Asia-Pacific session. And then again on the retest, we've had a nice $10 bounce off that level. So any of the early birds in already, uh, be nicely on side here at this point in time. Um, just quickly then, gonna, gonna just remove, if I can, my camera for one second because I wanted to just put gold onto a monthly chart because I made some annotations about the gold price movement over the last 20 years basically. Because there's a lot of people out there talking now, now that we've almost hit our objective of hitting 2,000 or close to it, let's say. Where do we go from here? And quite an interesting observation has been the type of price movement that we've seen historically. Now, if you go all the way back to the left-hand side, and I'll take you back— let's rewind the clock back to the global financial crisis. And you'll remember, post the then Lehman Brothers collapse, when then QE was initiated shortly after, gold was roughly seeing, you know, if you put a horizontal line here at around the $1,000 marker— I mean, if you remember back then what a massive level 1,000 was at the time. Now, when we did eventually, after multiple tests over a period of basically a year and a half at that level, look at the type of price movement. I'm just going to drop a line here roughly around the 1,000 marker. Look at the type of price movement that we saw then after the break. I mean, pretty quickly, I mean, within a period of 2 months or so, we rallied a good $200. That's $200 on top of the $1,000 price. Within the period of about 6 months to a year, we were already up pushing, uh, you know, $1,250. If you look then when we got to $1,250, you can see we naturally found a bit of a, a point here at around $1,300. As soon as we broke $1,300, you can see within again a matter of months we went from 1,300 all the way up to 1,900. So the point being here is obviously in hindsight it's quite easy now to look back on this price and see the, the type of movement we had. But remember, at this point in time, these were unprecedented levels, kind of like what we're talking about now when we reference 2,000 and potential there above and beyond. And the point being is that when we get to these types of levels, it does become somewhat ever more behavioral. And, you know, I was having a chat with Will last night, and we did record a conversation between him and I because he's the— he's always been a gold bull. And some interesting comments he made. And it's the idea then that, you know, inevitably when we do get up and we test this 2,000 and we break, well then, you know, what's to say we couldn't go sharply higher using history as a guide to how generally investors have behaved? Now, definitely the scene is set. There's plenty of ammunition here to support the notion that fundamentally gold could continue to go quite considerably higher from here. I wouldn't, as I said, get too nervous about this pullback that we've had. I mean, even if we did get a further pullback, you know, there is— this is the first nearest and clearest area of strong support. But if that even got broken, then obviously you've got the psychological 1900, and you can see that area of consolidation we had previously going back to last Friday, and then the recommencement of trade on Sunday night on Globex. So still remain pretty bullish there. And the other one that's moved a lot, of course, is silver. I was just looking at— I mean, this was silver when we were discussing it last week, and, you know, kept that trend line on from some of the price that was respecting on the general trend higher. And it was roughly around the point of where we got exhaustion with the push higher seen in the Asia-Pacific session. So pretty much in tandem, these two tend to be moving on generally the same kind of factors. But here again, getting quite technical, we breached 25. That really saw within the matter of, what, the overnight session— talking about a 3-hour period— we added an extra dollar on that price. Before then, we had that bout of profit taking again on the daily pivots around that R2. You had the trend line, it's got the psychological 26. Gold was also, of course, backing off, uh, from that move as well after a similar price point. You can see the daily pivots do generally act as quite a nice benchmark for what a lot of market participants will be looking at to book in these typically fast money momentum type moves because they want the nearest and clearest opportunity to how to exit and manage that trade quite proactively. So silver came all the way back down, but again pretty strong area of support here. You've got the, the push higher, and then you can see it's provided a nice floor for price during yesterday's overnight Asia-Pacific session, during yesterday's European afternoon, and the overnight Asia-Pacific bounce down coinciding to the tick with the pivot level on the daily pivots here. So again, a key area of support for silver. But again, you look at silver on the weekly You know, we were talking about this last week and we were saying how prudent it was given how, how much momentum that silver can have when it really starts to shift. And if anything, a lot of people have been looking at this precious metal even more so given the fact that percentage-wise it's actually outperformed gold. But yeah, technically busting through that $21 was a momentous occasion because then it meant we ran up to $23 in very quick succession. 25 led to 26, and 26— you remember, this is an unaltered chart that we've been looking at for, for a number of sessions now when I've been delivering these briefings, and that's that key area of support going back to 2011-12, and we're right on there at the moment. So again, the profit taking that materialized overnight at these levels here— so not only in the short term with the trend line, with the pivots, with the psychological 26, but you, you know, step out of that and look on the bigger picture it's such a big level, 26. There's some profit taking there, I think, is, is, is not that surprising. Again, can we bust 26? Well, if we do, if that does happen, then there's definitely, you know, losing the handles, 27, 28, 29s would all be targets. I'd probably have a look as well at that. There's a respective low and high that was seen going back to Feb 2013 and around April 13, which was around the 28 handle for for me would be the next big target. So $26 to $28 to $30 then. Um, so yeah, definitely warrants monitoring. As I said, conditions are still set fundamentally at least for, for these precious metals in the medium term to continue to remain supported irrespective of the fact you might get some near-term profit taking given the acceleration of some of these recent moves that we've had. Um, a quick look then at some other news flow. There's not too much for me to comment on this morning. Before I forget, always feel free to like and subscribe to the channel. Really appreciate all the engagement and support as ever. And feel free always to drop me any questions in the comments section if you're watching this on YouTube. Always happy to help. But having a look here at some of the other talking points. And the big one, of course, is Capitol Hill, because even though most people are expecting, anticipating the Fed to remain in ultra-accommodative mode, just given the situation with the COVID developments we've seen since the last meeting in June of the FOMC, all eyes remain somewhat on what type of fiscal response can these politicians make in Washington. And what we've had is a little bit of developments in the overnight session. Senate Republicans have presented their $1 trillion plan to bolster the US economy in a series of bills that would, what would trim the extra unemployment benefits. Remember, that's that $600 one down to $200. That was somewhat talked about last week, so it's not massively surprising. They also will send the $1,200 payments to most Americans. And so another stimulus check. Shield businesses, schools, and other organizations from lawsuits stemming from coronavirus infections. So that's the latest. The bill introductions are just the first step though towards now the new phase of negotiations that will happen, uh, before they can get a compromise plan with the Democrats, who've offered their own stimulus program of $3.5 trillion. So quite far apart at this point in time. Supplementary unemployment insurance, of course, is expiring, as we know, this Friday on the 31st of the month, and other elements of the last stimulus legislation are starting to dry up. So it's ultra important that they do cut a deal, and really time is of the essence, not just because of that almost cliff-edge deadline about those particular programs, but lawmakers are set to leave for August in a break for 2 weeks, this kind of typical summer season break. And they also face a timetable somewhat compressed by the looming November election, when they would then return in September, because all focus will then be geared up into the run into the, the actual election itself. So I do think still that markets' relative calm at the moment, whether rather reflected in the equity stabilization or the fairly calm nature of the VIX, for example, is reflecting the notion that most people believe that just because of the necessity to get this done, it will get done in some shape or form. So this is the first step towards that, but definitely warrants watching very closely as the week develops. This is the other thing, quick update on COVID. This probably also helps that general notion of calmness to a certain degree because the US Sunbelt coronavirus surge shows some early signs of easing. Now, this can't be said for all areas across the globe at the moment. There certainly are some spots of potential flaring that, that does need to be monitored quite closely. But as we know, markets, particularly in a Western world sense, when we're looking at the type of assets that we do with US products, that they are most responsive to the world's largest economy. What is the situation here unfolding in the US? And what we're seeing then is, if I flip over to here, the— this is a 7-day rolling average of new cases per million. And we're looking at Florida, Arizona, Texas, California. And obviously Florida, Texas, California, the 3 kind of big guns that we need to watch that are really key for the economic performance of the US economy. Now Florida on Monday reported fewer than 9,000 new cases. It's the smallest increase in almost 3 weeks for Florida. California and Arizona both reported the fewest number of new infections in about 1 week, and as of Monday, the 7-day average in Texas remained below its 14-day average for 4 straight days. Overall then, the US reported its smallest daily increase in daily coronavirus deaths in 3 weeks. So if anything, from these lines, what we're trying to extrapolate is that things are starting to now plateau, if not decrease slightly, from that period or episode of market nervousness that was clearly apparent just about 2 or 3 weeks ago when these numbers were still moving sharply higher at that point in time. Don't get me wrong though, this doesn't detract from the point that the Fed still need to sound, um, more dovish, more committed than ever to doing whatever is necessary to in order to support the economy. And these politicians need to follow through with their fiscal pledges as well, because the world still is in a very difficult place. The US economy in terms of its shape of recovery, and that's only going to be brought more to reality when we get that advanced GDP reading, of course, on Thursday for Q2, our first look at how bad it really has been. With anticipation, that figure is going to come in with a consensus reading of -34%, of course. The other thing that came out yesterday, but I just do think that warrants monitoring, of course, is always the drug news and developments in regard to COVID-19. Moderna shares finished up about 9% yesterday. As you probably saw, they've been given first doses of its experimental COVID-19 vaccine to, to participants in what will be a 30,000-person trial. Usually then, this is the last kind of step before a new product is submitted for regulatory approval. So we're getting ever further down that, down that line. Now, Moderna CEO estimated the vaccine had a 75% chance of meeting the US FDA's requirement of being 50% effective. So still a long way to go, and, you know, whenever these medical trials are taking place, there's nearly always inevitably a road bump along the way. But the reason why I'm pointing this out is how the market generally has reacted to these singular headlines as they drop down the tape when we've had these kind of positive headlines. So just be aware of that on Moderna and where exactly it is at the moment on the— this, this trial status, so to speak. The other thing then to have a look at for today is the earnings picture. It really does step up considerably in earnings pace This week is the peak of the season, and today pre-market you can see here you've got Pfizer, McDonald's, 3M, you've also got Visa after market. To give you an idea then, all four of those companies are Dow components, and collectively they represent roughly 15.5% of the Dow Jones Industrial Average. Uh, and again, just taking Visa out, that's 10% of the Dow's reporting before the opening bell today. So if you are looking at the Dow future, I definitely would keep a close eye on that prior to the market open as these numbers do start to come out, given that cumulatively it's quite a large proportion, 1/10 of the entire index, uh, that's coming out. Otherwise, on the calendar, it is pretty quiet. There's not a great deal really going on, uh, certainly not in the European and UK session in the morning. As we're getting towards the afternoon, we've got US consumer confidence, and actually that is anticipated to decline from previous to 94.5 from 98.1. A lot of this being that this is reflective of what has been happening nationwide with COVID developments over the previous period of the last month or so. Otherwise, we get the API oil inventory numbers as per usual, much later after market. And then fixed income supply, we've got some UK auctions. We've also got a German 2027 €4 billion auction as well this morning. And then from the US, we've got a 7-year note auction for $44 billion coming for any fixed income traders later on this evening at 6 PM London. That'll be midday Chicago. That That is it. So again, don't forget to subscribe to the channel. I'm going to release hopefully another video of that discussion that Will and I had last night, just talking about gold quite informally, about our views and so on. So do check that out. I'll try and release that later on today. But otherwise, have a good session ahead and I'll see you guys same time tomorrow. Take care.